HOW GREEN ARE BIOFUELS? - Understanding the risks and policy landscape in Indonesia - CDP
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HOW GREEN ARE BIOFUELS? Understanding the risks and policy landscape in Indonesia April 2021
CONTENTS
Authors 04 Introduction
Hugo Rosa da Conceição 05 Biofuel policy in Indonesia
Nur Arifiandi
Helen Finlay 11 Disparities between Indonesia’s biodiesel and
Jodie Hartill environmental regulations
Acknowledgement: 14 Transparency of Indonesian biofuel producing
companies and its impacts on forests
Pietro Bertazzi
Thomas Maddox 16 Conclusions and policy recommendations
Rini Setiawati
Wisnu Wibisono 18 Annex
Traction Energy Asia
19 References
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2
3
INTRODUCTION
There have been longstanding issues with deforestation in Indonesia, home
to some of the largest tropical hardwood rainforests and peatland expanses
on the planet. Since the 1960s forests have been subject to commercial-scale
exploitation, in particular the conversion of primary forests, which have been
under sustained pressure from logging, timber extraction, and conversion to
palm oil.
Yet according to the government, there has been signs of recent progress, with
deforestation rates in 2020 falling to its lowest level since monitoring began
in 19901. This progress can be attributed to policies such as the Government
of Indonesia's moratorium on clearing primary forests and issuing licenses for
new oil palm plantations, against a backdrop of declining palm oil prices; an
unusually wet year causing flash flooding and landslides across the country,
displacing 599,272 people in Kalimantan in January 2021 alone2; and a global
economic decline due to COVID-19, resulting in less forest-clearing activities.
The Indonesian government has publicly stated its ambition for balancing
environmental sustainability with social welfare and economic growth, as
outlined by the BAPPENAS Green Growth Plan. Commitments to address
deforestation, seen as one of Indonesia’s primary environmental and social
challenges, are a central part of this.
The government aims to reduce carbon emissions by reducing consumption of
imported carbon-intensive fossil fuels. Since 2006, the government has issued
several regulations to increase consumption of biofuels, particularly from
palm oil-based biofuel.
As an agricultural commodity, palm oil plays a vital role in the development
of the Indonesian economy. However, if palm oil-based biodiesel is set to
take over from fossil-fuel energy consumption then its sustainability is of
central concern. The issue of biodiesel is inseparable from the challenges
that continue to surround palm oil, which remains one of the driving causes of
deforestation in Indonesia3.
The sustainability of biodiesel will only succeed with coherent policy direction
to support Indonesia’s energy targets. This brief outlines potential policy
conflicts and makes recommendations on how best to avoid them. It also
provides an assessment of the environment-related corporate transparency
of biofuel production for internal consumption in Indonesia, one of the several
relevant measures required to ensure that the production of biofuels is
deforestation-free.
4
BIOFUEL POLICY IN INDONESIA
Biofuels in Indonesia: background and context
Fuel demand in Indonesia is growing rapidly. Oil on fossil fuels and to absorb excess supply of palm oil;
consumption in the transport sector has risen from 10,711 a biodiesel mandate of 100% palm oil by 2026 would
kilotonnes of oil equivalent (ktoe) in 1990 to 51,490 ktoe in eliminate its need for fossil fuels entirely.
20184. The consumption of oil products in the transport
sector (gas/diesel and motor gasoline) has constantly Indonesia is the largest palm oil producer in the world
increased in the last decades, while the consumption producing more oil palm fruit than the other nine
of other oil products remains steady or decreased. The countries in the top 10 put together (see Figure 1). 69% of
increase in oil consumption in Indonesia was driven the country’s production is exported, mostly to India7.
by automotive fuel demand. Despite being part of the
Organization of Petroleum Exporting Countries (OPEC),
Indonesia became a net importer of oil in the 2000s5, Figure 1: Top 10 oil palm fruit producers worldwide,
representing an increasing burden on the country’s 20198
budget. To reduce those expenses and its increasing
dependence on imported fuel in a context of growing Indonesia
demand, Indonesia has, since 2006, turned to biofuels Malaysia
from palm oil. With a larger yield than any other source
Thailand
of vegetable oil, palm oil is an ideal crop for biofuels from
a production standpoint. It is cheaper than any other Nigeria
vegetable oil used in biodiesel production, is a perennial Colombia
crop with a long life cycle of 25 years, productive over a
Guatemala
significant duration of time6 and, more importantly, is a
Papua New
widely established crop in Southeast Asia. Guinea
Ghana
The proportion of domestically consumed palm oil used
Brazil
for biofuel production in Indonesia has grown as a result
Honduras
of policy incentives to reduce the country’s dependency
0 50 100 150 200 250 300
Millions of Tonnes
Guatemala Thailand
Honduras
Nigeria Malaysia
Columbia Indonesia
Ghana
Papua New Guinea
Brazil
Country
0 Millions of tonnes 300
5
Indonesia’s palm oil is mostly produced in private lands. nationwide11. For that reason, Indonesia’s decision to
Estates owned by large producers account for the ramp up biofuel production will lead to a higher demand
production of 53% (8.68 million ha) of the country’s palm for palm oil, which will result in increased pressure on
oil, whilst smallholder palm oil production accounts for existing forests. Further loss of forests threatens the
40% (6.72 million ha)9. Government estates account for rich biodiversity in this vulnerable landscape, could
only a small part of the production. The total area used exacerbate GHG emissions, divert palm oil from the
for the production of palm oil in the country has grown food chain and expose those living in converted lands
from 4 million ha in 2000 to 14 million ha in 201910. to extreme climate change events. The remainder of
this section will present the most relevant regulatory
Palm oil expansion has been linked by some studies as developments in the biofuels sector in the country,
a driver of deforestation in Indonesia. Recent research exploring how those regulations might affect biofuel
states that, between 2001 and 2016, oil palm plantations producing companies.
may have caused 23% of the total deforestation
6
Biofuel regulation development in Indonesia
The development of biofuels in Indonesia started in 2006 2008 saw a major development in Indonesia’s biofuel
when the government issued the National Energy Policy12, policy. The Minister of Energy and Mineral Resources
which established that biofuels should comprise at least (MEMR) established15 the mandatory utilization of biofuels
5% of the country’s energy mix by 2025. Indonesia further in the transportation, industrial, commercial, and electricity
developed its energy regulations with a law13 aimed at generation sectors, with a progressive target for biofuel
further reducing the country's dependence on imported blending over the 2008–2025 period16. The regulation also
refined oil, while boosting the use of other energy sources, established that “enterprises performing trading business
including biofuels14. activities on biofuel as alternate fuel must possess a
business permit”17 issued by the ministry.
Blending targets
In order to introduce biofuels into transportation fuel, it is commonly blended with fossil fuels in different
concentrations. A mixture of 5% biofuels and 95% fossil-based diesel is usually called B5, one with 20% biofuels is
called B20 and so forth. In 2020, the Indonesian government has a target of 30% biofuels in the fossil-based diesel,
sometimes referred to as the B30 program.
Table 1: Main biofuel-related regulations in Indonesia
Year Document Main contents
Promote the supply and increased consumption of biofuels with the goal
2006 Presidential Instruction No. 1
of replacing fossil fuels
2006 Presidential Regulation No. 5 Biofuels should comprise at least 5% of the country’s energy mix by 2025
Achieve Indonesia’s energy independence, boost the use of other energy
2007 Law No.30 of 2007
sources, including biofuels
Mandatory utilization of biofuel in the transportation, industrial,
2008 MEMR Regulation No. 32 commercial, and electricity generation sectors, with a progressive target
for biofuel blending.
Sets certain sector industry obligations/ mandatory to use biodiesel and
2015 MEMR Regulation No. 12
bioethanol as a fuel mixture, revises regulation No. 32
Ministry of Agriculture Ministerial Exempts palm oil plantations supplying palm oil for biofuel production
2015
Regulation No. 11 from ISPO compliance
Presidential Regulation No. 22 – Establishes the national strategic plans for cross-sectoral energy planning
2017
National Energy General Plan (RUEN) and coordination
Makes mandatory for all Fuel Business Entities to mix biodiesel with diesel
2018 MEMR Regulation No. 41
fuel based on the minimum percentage set by law.
2020 Presidential Regulation No. 44 Updates guidelines for the ISPO
7
Blending targets
Between 2013 and 2015, biofuel blending targets18 were the economic slowdown from the COVID-19 pandemic,
amended several times19. Table 2 shows how these the government of Indonesia is still pressing ahead with
targets have changed. The responsibility for meeting the B30 program and aiming to launch the B40 program
these targets falls on companies20. in 202228. In parallel, the government is also in the testing
stage to develop D100 (green-fuel 100% plant-based) and
Table 2: Indonesian Biofuel blending targets for most this is expected to start production by 2023. The program
sectors21 is estimated to consume 30 million tonnes of Crude Palm
Year
Oil (CPO) annually29.
2009 2010 2014 2015 2016 2020 202222
Biofuel subsidies
Blending
1% 2.5% 10% 15% 20% 30% 40%
% target Low global oil prices have necessitated government
subsidies to support blending targets, due to the price
of biodiesel being higher than the base diesel fuel
Despite current policy incentives, Indonesia was falling price30. These subsidies have been issued through
short of biofuel blending targets until 2020. In 2018, it the Indonesian Oil Palm State Fund (BPDPKS), which
stood at 12.7%, well below the 20% target23. Researchers provides a subsidy to biofuel producers31. The amount
identified that regulations are not effectively enforced paid is the price differential between fossil-based diesel
and that it “is not seen as a binding mandate, especially and biofuels32. Not all producers are able to receive
for fuel suppliers not receiving subsidy funds24". In a bid a subsidy however, with the government selecting
to accelerate the achievement of the B20 mandate, in producers who meet production requirements and
2018 the MEMR required25 the blending of the minimum allocating amounts to be produced by them33. The Annex
percentage set by law in all sectors. The regulation states at the end of this briefing shows allocations from 2019 to
that the B20 mandate applies to diesel fuel processing 2021.
and trading/importing companies for both subsidized
and non-subsidized diesel fuel. Failure to comply with The subsidy is financed by tariffs on palm oil exports,
regulations can result in fines to the revocation of yet a decrease in the price of this commodity in the last
the company’s diesel fuel processing and/or trading year due to COVID-19 has resulted in a financial shortfall
license26. of around 195 million USD that will need to be taken
from the state budget. The biodiesel subsidy is set to be
In 2020, the expected blended target by MEMR regulation part of the government’s COVID-19 recovery plan, with
no.12/201527 has been achieved, with the blending mix Finance Minister Sri Mulyani Indrawati estimating that
of biodiesel B30 starting implementation nation-wide. a total of 250 million USD will be needed to keep the
Despite biodiesel consumption being predicted to decline biodiesel program afloat34,35.
around 13% from the allocated production in 2020 due to
8
Regulatory incentives to increase biofuel Palm oil certification
production
There are sustainability certification schemes for palm
The stage is set for increased biofuel production, so how oil production applicable in Indonesia, such as the
does current policy facilitate anticipated expansion? voluntary Roundtable on Sustainable Palm Oil (RSPO),
which through multi-stakeholder governance issues a
{ Companies receive financial incentives to boost their
global standard, and the Indonesia specific, mandatory
biofuel production.
ISPO. There is, however, no specific regulation on
{ Company revenue is protected by biofuel subsidies. sustainability criteria for domestically consumed
{ At plantation level, biofuel producing companies biodiesel37. On the contrary, between 2015 and 2020,
did not incur ISPO fees for compliance verification the Ministry of Agriculture specifically exempted palm
between 2015 and 2020. oil plantations supplying palm oil for biofuel production
from compliance with the ISPO38. In a positive
Therefore, as table 3 shows, these factors have development the rules for the implementation of the
contributed to the increasing number of biorefineries, ISPO were changed in 2020 to mandate most oil palm
and their subsequent capacity to produce biofuel, and plantations once again in Indonesia, including those for
ultimately the utilization of the higher supply. biofuel production, to comply with ISPO.
Table 3: Biodiesel Utilization and capacity in Indonesia - 2009-201836
Year
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Blending % target 1% 2.5% 2.5% 2.5% 2.5% 10% 15% 20% 20% 20%
Blend rate 0.39% 0.66% 1.10% 1.81% 2.93% 5.42% 2.61% 10.78% 8.85% 12.7%
Biodiesel on-road use
95 178 287 535 838 1,476 665 2,621 2,272 3,650
(Million liters)
# of biorefineries 20 22 22 22 26 26 27 30 32 31
Total biodiesel industry
3,128 3,921 3,921 4,881 5,670 5,670 6,887 10,898 11,547 11,357
capacity (Million liters)
9
Ensuring environmental safeguards
An increase in production and capacity is likely to pose Even when biofuel policies show good intentions
a major threat to Indonesia’s forests if not managed towards reducing the environmental impact of increased
and monitored carefully. The margin for error is production, they fall short regarding implementation
small, regulation that aims at stimulating an increase details. Indonesia’s 2006 biofuel plan proposed an
in the production of palm oil must have significant expansion of palm plantations towards unproductive
environmental safeguards. A recent report from Coaction or damaged forest lands40. The intended increase in
Indonesia shows that “looking at the projected demand production would require more than 10 million hectares
for biodiesel, it can be concluded that the demand for of land, as identified by a report from the government’s
domestic CPO will continue to increase. This increase is National Biofuel Team (Timnas BBN). The same report,
also directly proportional to land requirements, especially however, “only identified 0.3 million hectares of degraded
because the average productivity per hectare is still low39". land as suitable for biofuel production, exposing a large
gap between the amount of biofuel that can be produced
The lack of mandatory certification, the provision of without causing environmental damage and what would
subsidies, and the aggressive regulatory push for more be required under the Timnas BBN plan41".
oil palm production (e.g., fines for B20 non-compliance)
create conditions for producers to maintain business-as- Crucially, biofuel policies are also often at odds with
usual production systems instead of investing in more stated environmental objectives set by the Indonesian
sustainable production innovations, such as increasing Government. The next section will analyze the
land productivity. Therefore, biofuel regulations in contradictions between the environmental risks posed by
Indonesia, as they stand, may lead to increased pressure the regulatory framework driving biofuel expansion and
on Indonesian forests. the targets set by the Indonesian government to reduce
deforestation and emissions.
10DISPARITIES BETWEEN INDONESIA’S BIODIESEL
AND ENVIRONMENTAL REGULATION
The production of biodiesel shows growing trends in the country, almost doubling
the production in the past 10 years42. Based on these developments, the Indonesian
government prioritized the development of biodiesel and set a target to increase
production, with 15 million kilo Liter (mkL) to be produced by 2030 and 54.2 mkL
by 2050. To support the achievement of that target, the government will allocate
4 million ha of area to support biodiesel production by 202543. Parallel with the
government's ambition in increasing the development of the biodiesel program, a
series of environmental commitments and targets, as well as regulations to limit
deforestation has been decreed by the government.
Moratorium on new palm oil plantations Palm oil productivity (Oil Palm Plantation
Rejuvenation Program)
Presidential Instruction No.8/2018 established a
moratorium on permits for new palm plantations for 3 Increased plantation productivity is seen as one of the
years, as well giving the government authority to review alternatives to produce more palm oil without increasing
existing licenses and revoke them if the area has not the planted area. Productivity, however, has long been
yet been cleared44. It aims to promote better palm oil an issue in Indonesia, with a particularly stark gap
governance, reduce greenhouse gas emissions from between private companies and smallholders. The
land use change, and increase palm oil productivity. The low intensification, and often unsustainable farming
effectiveness of the moratorium is, however, questionable, practices, along with less government support for
as data from the Ministry of Agriculture show that the area smallholders46, results in smallholders producing on
of plantations expanded from 14 million hectares in 2018 average 2-3 ton/ha/year, while private companies
to more than 16 million in January 202045. producing on average 4 ton/ha/year47.
To address low productivity, the Indonesian government
launched the Oil Palm Plantation Rejuvenation48 program
(Peremajaan Sawit Rakyat - PSR) in 2017. By 2020, only
11%49 of the program’s total target has been achieved.
There are concerns of a lack of clear targets and clear
guidance on how to increase smallholder productivity50.
The government is also considering stopping the blending
program at a maximum 50% blend if there is no further
improvement on the production yield of the palm oil51.
Without a significant improvement in palm oil productivity,
the current blended biodiesel target could potentially
drive 4.5 million hectares in additional forest loss52. These
losses will likely rise with increased biofuel production to
curb the country’s current daily consumption of 1 million
barrels of gasoline, as the Minister of Mineral and Energy
Resources warned in December 2020. An additional 9 to
15 million ha of new palm oil plantations53 is expected to
be required to meet demand.
11Omnibus law Renewable Energy
In 2020, the Indonesian House of Representatives Another path aimed by the government to reduce
approved the Job Creation Law (Law No. 11/2020 on emissions is upscaling the development of renewable
Job Creation, commonly known as the “Omnibus Law”). energy. The Energy sector has been targeted to reduce
The Omnibus Law amends several sectors, including 314-398 Mt CO2e from the business as usual (BaU)
the environment and forestry sectors, allowing the emission (1,669 Mt CO2e) by 203057, of which 54%
government to approve agribusiness investment in (170.42 Mt CO2e) is to be achieved by contributions
designated forest and peatland areas that are currently from renewable energy58. These plans align with the
protected by a deforestation moratorium. Moreover, Indonesian government’s objective of having renewable
the bill eliminates the legal requirement to maintain a energy covering 31% of the country’s primary energy mix
minimum of 30% primary forest cover on provincial by 2050 (23% by 2025), as stipulated under the National
land and waivers the legal liability for companies that Energy Regulation (KEN)59. In 2017, to support the
experienced fires on their concession areas54. implementation of KEN, the government has published
National Energy General Plan (RUEN)60.
While the Omnibus Law may increase attractiveness to
invest in Indonesia due to easier capital flows55, it could REDD+
escalate the risk of deforestation and to customary
land use rights. Sectors such as palm oil have made Indonesia has been involved with Reducing Emissions
progressive efforts to reduce forest destruction through from Deforestation and Forest Degradation (REDD+)
“No Deforestation, No Peatland, No Exploitation” from an early stage. REDD+ has led to numerous
(“NDPE”) policies, which may be reduced in significance achievements, especially regarding a better
as a result of the Law. Despite the growing push for understanding of the underlying drivers of deforestation,
financial institutions to reduce their contribution to but progress has been slower than hoped, mainly due to
deforestation, the political outlook also needs to susceptibility to political turnover at each election cycle,
be consistent to enable both economic growth and focus on technicalities rather than on directly addressing
sustainable practices for plantations. drivers of deforestation, varying rates of progress at the
subnational level, among other issue61.
Nationally Determined Contribution (NDC)
In addition to those policies, Indonesia has other
overarching environmental targets that might be affected
by a potential increase in palm oil production. The most
relevant of them is Indonesia’s NDC which commits to
reduce Indonesia’s GHG emissions by 29% on its own
efforts, and up to 41% with international support56.
Considering that main contributing sector for Indonesia’s
emissions is Land-use Change and Forestry (LUCF), an
important part of the committed reductions will have to
come from that sector. Actions to reduce deforestation
and forest degradation are integral parts of the NDC,
although no specific actions on palm oil are mentioned
in the NDC for the LUCF sector.
12Policy incoherence is a risk
The policies described above represent important and was originally conceived as an alternative to increase
positive commitments towards reducing deforestation Indonesia’s fuel security, as part of the country’s
and GHG emissions in Indonesia. However, the policies renewable energy strategy, and as an additional
in place to expand the production of biofuels, described contribution to reduce carbon emissions and support the
in Section 1, have the risk of contradicting the country’s Paris Agreement’s and SDGs’ commitments.
sustainability efforts. The expansion of palm oil plantations
required to provide the necessary raw material for biodiesel For it to be sustainable and categorized as a renewable
production in Indonesia is likely to increase pressures on energy source, biofuel production requires coherent
Indonesia’s forests, being thus counterproductive to the policies among government sectors and the adoption
Indonesia’s sustainability objectives. of stringent forest safeguards within the raw material
supply chain. Transparency regarding the environmental
Unless the sourcing of biodiesel is deforestation-free, aspects of biodiesel production is one among several
its claimed “green fuel” status is both inaccurate and actions required to achieve a deforestation-free biodiesel
misleading. The production of plant-based diesel supply chain.
13TRANSPARENCY OF INDONESIAN BIOFUEL
PRODUCING COMPANIES AND ITS IMPACTS
ON FORESTS
This section will provide an assessment of Indonesian Biofuel producers in terms
of their environmental transparency. A variety of measures is required to ensure
that companies to adopt more environmentally responsible behaviors. Increased
transparency is one of them, and it promotes sustainability in several ways:
{ allows both customers and stakeholders to assess The majority of companies supplying the B20/B30
progress on companies’ deforestation commitments, program are subsidiaries of larger companies; the 20
supplying companies represent 10 larger companies,
{ facilitates the risk assessment and identification 5 of which are listed as amongst the world’s largest
of opportunities by investors and purchasing traders/processors in a recent situational analysis
companies, commissioned by CDP64. This concentration is likely
{ fosters compliance with regulatory requirements, caused by the large capital requirements for refinery
ownership65. Of the companies in table 4, only three
{ strengthens accountability, scored either an A or B (good) in their disclosure to CDP;
{ improves the dialogue between private and public these companies also displayed a higher SPOTT score
entities and protects smallholders. than the other companies. This shows that whilst certain
companies perform well, there is significant opportunity
The assessment does not intend to be exhaustive; it will to improve reporting of standardized information by the
assess the companies, shown in Table 4, appointed to supply sector to support traceable and sustainable palm oil.
biodiesel to the B20/B30 program in 2019 and 2020. The
exact allocation for each producer is shown in the Annex.
Table 4: B20/B30 program suppliers
CDP Palm Oil CDP Palm Oil SPOTT 11/2020
Parent Headquarters RSPO Member
Supplier Name Score 2019 Score 2020 (Parent (Parent Company,
Company (Parent Company) (Parent Company)
(Parent Company) Company) E score)
Smart Tbk Golden-Agri
Singapore A- A- 81.2% Yes
Sinar Mas Bio Energy Resources
Musim Mas
Intibenua Perkasatama Musim Mas Singapore B B 85.7% Yes
Sukajadi Sawit Mekar
Wilmar Bioenergi Indonesia
Wilmar Nabati Indonesia Wilmar
Singapore B- A- 88.9% Yes
Multi Nabati Sulawesi International
Energi Unggul Persada
Cemerlang Energi Perkasa
Apical63 Singapore N/A B 82.5% Yes63
Kutai Refinery Nusantara
Batara Elok Semesta Terpadu BEST Group Indonesia F F 1.8% No
Darmex Biofuels
Bayas Biofuels Darmex Agro Indonesia F F 1.3% No
Dabi Biofuels
Pelita Agung Agrindustri Permata Hijau
Indonesia F F 37.2% Yes
Permata Hijau Palm Oleo Group
PT Tunas Baru
Tunas Baru Lampung Indonesia F F 14.2% Yes
Lampung
Louis Dreyfus
LDC Indonesia Netherlands F F 62% Yes
Company
First
Ciliandra Perkasa Singapore F F 64.08% Yes
Resources
14CDP Disclosure Roundtable on Sustainable Palm Oil (RSPO)
The analysis focuses on parent companies since none Among several other requirements, participation in the
of the subsidiaries have been invited to disclose to RSPO certification scheme is another indication of a
CDP66. Golden-Agri Resources, Musim Mas and Wilmar company’s willingness to increase transparency. RSPO,
International received good scores for their Palm Oil through stringent certification and global setting of
disclosures (from B- to A) in 2019 and 2020, with Wilmar standards via multi-stakeholder involvement, intends to
International improving from B- to A- in 2020. Six of the ensure the credibility of palm oil sustainability claims70.
ten parent companies, including all four headquartered in Most biofuel suppliers reviewed in this briefing are
Indonesia, received a F score in both years, they did not members of the RSPO, with exception of Darmex Agro
disclose to CDP. who had its membership terminated in 2013 by an
RSPO Complaints Panel decision due to its plantation
Golden Agri-Resources, which received an A- score, subsidiary, PT Duta Palma Nusantara, planting on
reports that two biodiesel plants have received ISCC peatland, clearing forest without a High Conservation
(International Sustainability and Carbon Certification), Value (HCV) assessment, and using fire for clearing71. The
and that all biomass intended for biofuels in destinations RSPO ACOP is the mandatory report issued by members
such as Europe are ISCC certified. However, it does to demonstrate their progress towards 100% sustainable
not provide information related to biofuels intended for palm oil72. However, none of the companies’ RSPO Annual
consumption in Indonesia. Apical, Wilmar International, Communication of Progress (ACOP) for 2019, the latest
and Musim Mas reported that biofuels are part of their publicly available, displays specific information on biofuels.
business activities, but also did not provide additional
information on domestic consumption in Indonesia.
Sustainability Policy Transparency Toolkit
(SPOTT) Evaluation
Another important evaluation of environmental
transparency in the Palm Oil sector is performed by
SPOTT67. It assesses “palm oil producers, processors,
and traders on the public disclosure of their policies,
operations and commitments to environmental, social
and governance (ESG) best practice68". The scores
shown in Table 4 are the environmental scores of the
companies. SPOTT defines transparent information
as “information communicated by a company via
publicly available materials that are freely and readily
accessible to all stakeholders69". SPOTT’s evaluation
does not necessarily mean that a company is
effectively implementing its commitments on the
ground, but that they are being transparent in their
ESG reporting. SPOTT’s scores show great variation
between companies, with some such as Musim Mas
with very high scores (for having, among several other
sustainability indicators, a time-bound commitment to
achieve 100% traceability to mill level), and others such
as BEST Group and Darmex performing poorly.
15CONCLUSIONS AND RECOMMENDATIONS
Indonesia has a way to go to ensure that its biofuels program lives up to its
green credentials. Sustainable biodiesel is at the crux of Indonesia's sustainable
development, requiring careful policy consideration of economic, social and
environmental issues. Government policy can improve environmental safeguards
for palm oil production by focusing on yield rather than expansion, smallholder
productivity and the integration of sustainability standards as the bare minimum
in biodiesel production. By increasing public-private sector dialogue, policy can
help to provide a pathway to better sustainability standards throughout the biofuel
industry resulting in higher yields, more efficient use of resources, and protection
of human rights. Setting all these actions in motion will no doubt reduce the need to
expand plantations, causing potentially irreparable damage to biodiversity and the
environment.
Policy Recommendations
1 Alignment of biofuel and forest policy.
{ A lack of policy coherency threatens the government of Indonesia’s sustainability
commitments to the Paris Agreement and the Sustainable Development
Goals. Whilst Indonesia has established a moratorium on new palm oil
plantation licenses, the acceleration of its biodiesel program contradicts those
commitments as this will likely require 9 – 15 million hectares of additional
palm oil plantations73. The energy transition from fossil fuels to biofuels is an
interrelated policy challenge and should be situated within the carrying capacity
of the Indonesia’s forests environment to ensure long-term sustainability.
2 Improve environmental safeguards for palm oil production.
{ There should be agreed cut-off dates within the Indonesian Sustainable Palm Oil
(ISPO) for land clearing for biodiesel feedstock. The Round Table for Sustainable
Palm Oil (RSPO) has a cut-off date of high conservation value clearing in 2005,
whilst the Forest Stewardship Council (FSC) has a cut-off date of 1994. There is
no such regulation within the ISPO, which is a policy gap that must be addressed
to prevent further conversion of forests into plantations74.
{ Biodiesel production guidelines currently focus on the blending target and quality
level. The integration of sustainability aspects within the industry’s regulations
is still lacking and needs to be scaled up. The International Sustainability and
Carbon Certification (ISCC) is one of the standards that can be referred to,
but its uptake remains low, due to its only mandated for the European Union
market. While mandatory ISPO as the standard for biodiesel feedstock has been
introduced, its implementation needs to be better monitored.
163
Enhance corporate environmental disclosure,
including biodiesel supply chains.
{ Mandatory transparency is needed at both the parent company level as well as
its subsidiaries. Despite environmental commitments of parent companies, even
those leading on sustainability action, the complexity of corporate structures and
the biodiesel supply chain hinders the ability of companies to ensure traceability
to plantations and guarantee deforestation-free operations. Enforcing disclosure
on environmental issues can help the government to understand companies’
roles in the biodiesel supply chain and better identify policy intervention areas.
4 Increase public-private dialogue and cooperation.
{ To fulfill the new biodiesel demand, the government must focus on supporting
the increase of smallholder yield production, by providing clear targets and
guidance, as well as to support the inclusion of smallholders within the biodiesel
supply chain.
{ Many companies in palm oil supply chains are already implementing commitments
and NDPE policies relating to other oil palm products. They are often equipped with
the right tools to address deforestation risks but have not used those in relation to
their palm oil business due to lack of regulatory pressure. Increased dialogue and
cooperation between public and private sectors can contribute towards identifying
win-win solutions and understanding how the private sector can contribute towards
government goals whilst meeting their commitments.
1718
ANNEX
Company allocation for the B20/B30 program, 2019-2021, kL
2019 202075 202176
Company Volume Company Volume Company Volume
Wilmar Nabati Wilmar Nabati Wilmar Nabati
904.431 1.374.000 1.375.486
Indonesia Indonesia Indonesia
Wilmar Bioenergi Wilmar Bioenergi Wilmar Bioenergi
844.949 1.323.000 1.324.226
Indonesia Indonesia Indonesia
Musim Mas 745.504 Musim Mas 1.085.000 Musim Mas 882.530
Cemerlang Energi Bayas Biofuels 862.000 Cemerlang Energi
449.753 483.263
Perkasa Cemerlang Energi Perkasa
483.000
LDC Indonesia 292.927 Perkasa Kutai Refinery
398.979
SMART Tbk 269.914 LDC Indonesia 434.000 Nusantara
Permata Hijau
Sinarmas Bio Permata Hijau 396.793
262.011 417.000 Palm Oleo
Energy Palm Oleo
Multi Nabati
Permata Hijau Sinarmas Bio 392.996
261.183 396.000 Sulawesi
Palm Oleo Energy
Multi Nabati Multi Nabati LDC Indonesia 386.610
253.427 393.000
Sulawesi Sulawesi Sinarmas Bio
364.700
Intibenua SMART Tbk 383.000 Energy
241.053
Perkasatama Intibenua SMART Tbk 352.782
354.000
Bayas Biofuels 229.075 Perkasatama Bayas Biofuels 349.180
Kutai Refinery Tunas Baru Tunas Baru
220.189 342.000 342.311
Nusantara Lampung Lampung
Sukajadi Sawit Kutai Refinery Energi Unggul
219.677 336.000 318.953
Mekar Nusantara Persada
Tunas Baru Sukajadi Sawit Intibenua
216.875 322.000 287.944
Lampung Mekar Perkasatama
Dabi Biofuels 207.344 Darmex Biofuels 287.000 Batara Elok
273.274
Batara Elok Batara Elok Semesta
175.859 287.000
Semesta Semesta Sukajadi Sawit
261.767
Ciliandra Perkasa 171.854 Ciliandra Perkasa 283.000 Mekar
Pelita Agung Pelita Agung Ciliandra Perkasa 259.882
145.396 230.000
Agrindustri Agrindustri Pelita Agung 239.215
Darmex Biofuels 85.680 Agrindustri 218.618
Dabi Biofuels 173.974
Darmex Biofuels 116.517
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14 Ibid
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18 See box page 4.
19 Ministerial Regulation No. 12/2015.
20 Kharina, A., Malins, C., & Searle, S. (2016). Biofuels Policy in Indonesia: Overview and Status Report, in https://
theicct.org/sites/default/files/publications/Indonesia%20Biofuels%20Policy_ICCT_08082016.pdf
21 Fitriani Tupa R. Silalahi, Togar M. Simatupang, Manahan P. Siallagan. Biodiesel produced from palm oil in
Indonesia: Current status and opportunities[J]. AIMS Energy, 2020, 8(1): 81-101. doi:10.3934/energy.2020.1.81,
and Kharina, A., Malins, C., & Searle, S. (2016). Biofuels Policy in Indonesia: Overview and Status Report, in https://
theicct.org/sites/default/files/publications/Indonesia%20Biofuels%20Policy_ICCT_08082016.pdf
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24 Kharina, A., Malins, C., & Searle, S. (2016). Biofuels Policy in Indonesia: Overview and Status Report, in https://
theicct.org/sites/default/files/publications/Indonesia%20Biofuels%20Policy_ICCT_08082016.pdf
25 Regulation No. 41/2008
26 Major regulatory and policy updates for the Indonesian energy sector - increased biodiesel requirements, proposed
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com/library/detail.aspx?g=e8471e59-288b-4f98-b6aa-56aff0130a94#:~:text=In%20August%202018%2C%20
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27 Menteri Energi dan Sumber Daya Mineral Republik Indonesia (2015). Perubahan Ketiga atas Peraturan Menteri
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28 Pemerintah Targetkan Solar B40 Bisa Terealisasi di 2022, in https://otomotif.kompas.com/
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theicct.org/sites/default/files/publications/Indonesia%20Biofuels%20Policy_ICCT_08082016.pdf
31 Ibid
32 Fitriani Tupa R. Silalahi, Togar M. Simatupang, Manahan P. Siallagan. Biodiesel produced from palm oil in
Indonesia: Current status and opportunities[J]. AIMS Energy, 2020, 8(1): 81-101. doi:10.3934/energy.2020.1.81
33 Indrawan, R. (2020). Pastikan B30 Tetap Jalan, Pemerintah Talangi Rp2,78 Triliun Kekurangan Dana Insentif
Biodiesel, in https://www.dunia-energi.com/pastikan-b30-tetap-jalan-pemerintah-talangi-rp278-triliun-kekurangan-
dana-insentif-biodiesel/
34 USDA (2020). Biofuels Annual, Indonesia, in https://apps.fas.usda.gov/newgainapi/api/Report/
DownloadReportByFileName?fileName=Biofuels%20Annual_Jakarta_Indonesia_06-22-2020
35 Fitriani Tupa R. Silalahi, Togar M. Simatupang, Manahan P. Siallagan. Biodiesel produced from palm oil in
Indonesia: Current status and opportunities[J]. AIMS Energy, 2020, 8(1): 81-101. doi:10.3934/energy.2020.1.81
36 USDA (2020). Biofuels Annual, Indonesia, in https://apps.fas.usda.gov/newgainapi/api/Report/
DownloadReportByFileName?fileName=Biofuels%20Annual_Jakarta_Indonesia_06-22-2020
37 Kharina, A., Malins, C., & Searle, S. (2016). Biofuels Policy in Indonesia: Overview and Status Report, in https://
theicct.org/sites/default/files/publications/Indonesia%20Biofuels%20Policy_ICCT_08082016.pdf
38 Coaction Indonesia (2018). Dynamics of Indonesian Biodiesel Downstream and Upstream Industry, in https://
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39 Kharina, A., Malins, C., & Searle, S. (2016). Biofuels Policy in Indonesia: Overview and Status Report, in https://
theicct.org/sites/default/files/publications/Indonesia%20Biofuels%20Policy_ICCT_08082016.pdf
2140 Ibid.
41 Kementerian Energi Dan Sumber Daya Mineral (2019). Kebijakan Nasional Energi Baru Terbarukan Dan Konservasi
Energi, in http://iesr.or.id/wp-content/uploads/2019/11/191216-IESR-Clean-Energy-Outlook.pdf
42 Peraturan Presiden (2017). Rencana Umum Energi Nasional. In https://sipuu.setkab.go.id/PUUdoc/175146/
Perpres%2022%20Tahun%202017.pdf
43 https://www.reuters.com/article/us-indonesia-palmoil/indonesias-freeze-on-palm-oil-plantation-permits-lacks-
transparency-industry-watchdog-idUSKBN1XG1PT
44 https://theconversation.com/indonesia-readies-its-green-diesel-these-are-the-likely-social-and-environmental-
impacts-145044
45 Andriani, D. (2021). Penyebab Produktivitas Kelapa Sawit Indonesia Kalah dari Malaysia, in https://ekonomi.bisnis.
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46 Kompas (2021). Produktivitas Sawit Indonesia Masih Kalah dari Malaysia, in https://money.kompas.com/
read/2017/06/20/131900726/produktivitas.sawit.indonesia.masih.kalah.dari.malaysia?page=all
47 Rejuvenation is the replacement of less productive, older plants with more productive and profitable new plants.
48 Dua Tahun Inpres Moratorium Sawit : Pemerintah Perlu ‘Tancap Gas’ Perbaiki Tata Kelola Sawit (2020), in https://
www.madaniberkelanjutan.id/2020/09/21/dua-tahun-inpres-moratorium-sawit-pemerintah-perlu-tancap-gas-
perbaiki-tata-kelola-sawit
49 Dua Tahun Inpres Moratorium Sawit : Pemerintah Perlu ‘Tancap Gas’ Perbaiki Tata Kelola Sawit (2020) in, https://
www.madaniberkelanjutan.id/2020/09/21/dua-tahun-inpres-moratorium-sawit-pemerintah-perlu-tancap-gas-
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50 Indonesia eyes biodiesel with 40% bio-content during 2021-2022 (2019), in https://www.reuters.com/article/us-
indonesia-biodiesel-idUSKBN1YE09C
51 Malins, C. (2017). Driving deforestation: the impact of expanding palm oil demand through biofuel policy. Cerulogy,
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deforestation_Jan2018.pdf?mtime=20180122234132
52 The Chain: Indonesia’s New Targets for National Biodiesel Program Could Sharply Increase Pressure on the
Country’s Remaining Forests (2020), in https://mailchi.mp/chainreactionresearch.com/the-chain-indonesias-
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53 ICEL. (2020). Berbagai Problematika Dalam UU Cipta Kerja Sektor Lingkungan dan Sumber Daya Alam (Seri
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54 The Omnibus Law also amends Law No. 18 of 2013 on Prevention and Eradication of Forest Destruction in relation
to certain adjustments regarding sanctions for various violations in forest areas.; Global Compliance News,
“Indonesia: Omnibus Law – Impacts on Environment and Forestry”, available at https://globalcompliancenews.
com/indonesia-omnibus-law-impacts-on-environment-and-forestry-12102020/
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58 Government regulation 79/2014.
59 Presidential Regulation 22/2017.
60 Nofyanza, S.; Moeliono, M.; Selviana, V.; Dwisatrio, B.; Liswanti, N.; Tamara, A.; Komalasari, M. (2020). Revisiting the
REDD+ experience in Indonesia Lessons from national, subnational and local implementation. CIFOR Info Brief
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62 Apical (Malaysia) Sdn Bhd.
63 Trase (2020). Corporate ownership and dominance of Indonesia’s palm oil supply chains, in http://resources.trase.
earth/documents/infobriefs/infobrief09EN.pdf
64 The company's subsidiary AAA Oils & Fats Pte. Ltd.is an RSPO member.
65 CDP invites parent companies to disclose, and their disclosure should also cover the direct operations and supply
chains of all subsidiaries. If the parent company excluded one of their subsidiaries in their disclosure, then they are
required to state their exclusion in their disclosure with the appropriate reason.
66 About SPOTT (2021), in https://www.spott.org/about/
67 Palm oil: ESG policy transparency assessments (2020), in https://www.spott.org/palm-oil/
68 Assessment scores explained (2021), in https://www.spott.org/assessment-scores-explained/
69 RSPO Certification (2021), in https://rspo.org/certification
70 Darmex Agro Group PT (2020), in https://www.spott.org/palm-oil/darmex-agro-group-pt/#substantiated-concerns
71 Annual Communication of Progress (2019), in https://rspo.org/members/acop
72 D. Garrett, S. Levy, K.M. Carlson, T.A. Gardner, J. Godar, J. Clapp, P. Dauvergne, R. Heilmayr, Y. le Polain de Waroux,
B. Ayre, R. Barr, B. Døvre, H.K. Gibbs, S. Hall, S. Lake, J.C. Milder, L.L. Rausch, R. Rivero, X. Rueda, R. Sarsfield, B.
Soares-Filho, N. Villoria,
73 Criteria for effective zero-deforestation commitments, Global Environmental Change, Volume 54, 2019, Pages
135-147, ISSN 0959-3780,
74 https://doi.org/10.1016/j.gloenvcha.2018.11.003.
75 USDA (2020). Biofuels Annual, Indonesia, from https://apps.fas.usda.gov/newgainapi/api/Report/
DownloadReportByFileName?fileName=Biofuels%20Annual_Jakarta_Indonesia_06-22-2020
76 Ibid.
23DISCLOSURE INSIGHT ACTION For more information please contact: CDP Policy Engagement Pietro Bertazzi Global Director, Policy Engagement pietro.bertazzi@cdp.net Helen Finlay Global Senior Policy Manager, Forests helen.finlay@cdp.net Nur Maliki Arifiandi Policy Engagement Manager, Forests nur.arifiandi@cdp.net CDP Forests Rini Setiawati Forests Manager rini.setiawati@cdp.net CDP Worldwide Level 4 60 Great Tower Street London EC3R 5AZ Tel: +44 (0) 20 3818 3900 www.cdp.net About CDP CDP is a global non-profit that runs the world’s environmental disclosure system for companies, cities, states and regions. Founded in 2000 and working with more than 590 investors with over $110 trillion in assets, CDP pioneered using capital markets and corporate procurement to motivate companies to disclose their environmental impacts, and to reduce greenhouse gas emissions, safeguard water resources and protect forests. Over 10,000 organizations around the world disclosed data through CDP in 2020, including more than 9,600 companies worth over 50% of global market capitalization, and over 940 cities, states and regions, representing a combined population of over 2.6 billion. Fully TCFD aligned, CDP holds the largest environmental database in the world, and CDP scores are widely used to drive investment and procurement decisions towards a zero carbon, sustainable and resilient economy. CDP is a founding member of the Science Based Targets initiative, We Mean Business Coalition, The Investor Agenda and the Net Zero Asset Managers initiative. Visit cdp.net or follow us @CDP to find out more.
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